A subtle change to an RBI circular has unlocked billions in potential foreign inflows to India. The central bank removed restrictions preventing lenders from leveraging funds under its foreign-currency non-resident deposit program, potentially attracting $45-50 billion according to Yes Bank economists.

The move addresses concerns raised by Citigroup's Samiran Chakraborty about clarifications markets needed on the program's mechanics. RBI also exempted these deposits from regulatory reserve requirements, enabling banks to offer more attractive rates to clients while supporting growth and margins.

HDFC Bank and other major lenders have already responded, hiking deposit rates to as high as 7.1% for five-year terms. With leverage factored in, Macquarie Capital estimates dollar returns could exceed 12%, mirroring the successful 2013 program that mobilized $34 billion during the taper tantrum.

Indian bank shares climbed for a second day as investors priced in the program's impact on financial sector growth. The relaxation could significantly boost foreign exchange reserves while providing banks with cheaper funding sources.